While there is concern among consumers that their properties aren’t valuing at what they did a year ago – largely driven by sensationalised media reports – Matt Nicastri of Cunninghams Real Estate says it is an agent’s duty to educate their clients on market conditions and allay their fears.
“With a long growth period comes a longer softening and stability,” he says. “It is important for agents to understand and communicate that previous downturns were triggered by major financial events.”
Nicastri says the market conditions we’re experiencing now are a natural correction primarily instigated by improved banking procedures and credit tightening (among other things).
“Our economy is performing better than ever, so agents and consumers should have confidence in the way the market is performing and understand that conditions are likely here to stay.”
Not like previous downturns
Following the rapid growth in property value at the turn of the century, values fell 8.4 per cent between the peak in December 2003 and January 2006.
The depth and duration of the decline varied across Sydney. The hardest areas hit were the South West (-16.4%) and Central Coast (-14.2%). The Northern Beaches and North Sydney only experienced a decline in value of 5.9 per cent and 7.5 per cent respectively.
Nicastri says this varied outcome can be expected in any downturn, as some markets retain value better than others.
“Historically, properties in markets closer to Sydney CBD hold their prices better and feel the impact of a downturn less,” he says. “These areas include the Northern Beaches, North Sydney, Hornsby, CBD, Inner South Sydney and the Inner West.
“However, this was not the case in 2007–2008 during the Global Financial Crisis (GFC),” Nicastri continues. “Whereas in the post-2003 downturn, the hardest hit were the more affordable areas, during the GFC we saw prices come back dramatically in the premium housing market.
“Although seemingly contradictory, the downturn was relatively short-lived. Declines were only recorded for approximately 12 months, as opposed to the two-year downturn post-2003.”
A lesser felt – but still relevant – downturn occurred in 2010, when property values fell 3.7 per cent between September 2010 and February 2012. The reason for the fall was the increase in interest rates and removal of the housing market stimulus – both of which were introduced to combat the GFC.
Nicastri says given the previous two downturns resulted from major events, the current market conditions are more representative of a natural softening or correction than a downturn.
Succeeding in a changing market
Nicastri says it’s important to look at your area and its market dynamics, rather than make general assumptions based on Sydney’s results.
“Agent’s must be specific and look at data that represents their market,” he says.
“You must understand your market intimately. Hyperlocal knowledge is what will help you accurately price properties, gain listings and instil confidence in your clients.”
Nicastri says it’s also important for agents and consumers to remember that property data is usually two to three months behind.
“Most reports use settled property data,” he says. “However, as agents, we have the benefit of understanding consumer and buyer confidence, and can access real time results that can instantly affect a whole market positively or negatively.”
*All stats from CoreLogic